Bbk ict market finland 11 2013

Opportunities and Challenges

FINLAND’S ICT MARKET

OFFICIAL PROGRAM

THE FINNISH ICT MARKET The report covers the current situation in Finland’s “postNokia� ICT market which is undergoing major structural changes. Startups are born and e.g. the gaming sector has emerging shining stars. In some areas like health care, major investments need to be made, while society is facing a recession.

Against this backdrop, this report examines in more detail various sub-sectors, which are growing and are likely to provide opportunities for Swiss ICT companies. It also lists trade events and professional associations which may help Swiss companies to gain a greater understanding of the Finnish ICT market and identify potential partners and customers.

Finally, the report examines regulatory issues, risk and success factors and suggests market access strategies.

Using this report, Swiss ICT companies should be better prepared to identify potential opportunities and strategies to enter the Finnish market.

Language: English Number of pages: 34 Author: Janne Kari Other architectural Reports: Are you interested in other architectural Reports for other sectors and countries? Please find more Reports here: www.switzerland-ge.com/reports

List of tables

1. EXECUTIVE SUMMARY _______________________5

4.2.1. Cloud computing ________________________ 16 4.2.2. Open data ____________________________ 16

2. INTRODUCTION _____________________________6

4.2.3. Big Data _____________________________ 16

2.1. Introduction to Finland and its ict sector __________ 6

4.2.4. Mobile technologies and Internet of Things _______17

2.1.1. Current economic situation __________________ 6

4.2.5. Social collaboration _______________________17

2.1.2. Building a new vision for the Finnish ICT industry __ 6

4.2.6. Software and services market _______________ 18

2.1.3. High rankings in education and ICT competences___ 7

4.2.7. eGovernment __________________________ 18

2.1.4. Finland has attracted foreign top ICT companies ___ 7

4.2.8. IT security (cyber security) market ___________ 19

3. MARKET ANALYSIS OF THE FINNISH ICT SECTOR8 3.1. Historical review __________________________ 8 3.1.1. From Nokia and GSM to Linux and Windows Phone _ 8

4.2.9. Mobile and mobile applications market ________ 20 4.2.10. Creative/video games market ______________ 21 4.2.11. Telehealth/e-health _____________________ 22

3.2. Important milestones in Finnish ICT after the year 1950 9

5. ACCESSING THE FINNISH ICT MARKET ________ 24

3.3. Overview ______________________________ 10

5.1. Background _____________________________ 24

3.3.1. Finland’s regional ICT clusters ______________ 10

5.2. Trade events ____________________________ 24

3.4. SWOT analysis of the finnish ICT market ________ 12

5.3. TRADE FAIRS __________________________ 25

3.4.1. Background of the SWOT analysis ____________ 12

5.4. Regulatory issues and common purchasing practices _ 26

3.4.2. SWOT matrix for the Finnish ICT market _______ 12

5.4.1. Background: enabling business opportunities ____ 26

3.5. Statistical data___________________________ 13

5.4.2. Regulation of electronic communications: Ficora __ 26

3.5.1. Sources of statistical data __________________ 13

5.4.3. Data ombudsman _______________________ 26

3.5.2. Finland’s total IT ________________________ 13

5.4.4. Data centre related regulations ______________ 26

3.5.3. Finland’s IT services market ________________ 13

5.4.5. Regulation for medical devices ______________ 27

3.6. Key market entry points ____________________ 14

5.5. Purchasing process guidelines ________________ 27

3.6.1. Entering the Finnish ICT market _____________ 14

5.5.1. Hansel, Hilma and Ted for procurement information 27

4. FUTURE TRENDS ACROSS ALL ICT SECTORS __15 4.1. How Future ICT technologies are developed in Finland 15

5.5.2. Tiera – coalition of municipalities for ICT _______ 27 5.5.3. Terms of contract for private sector IT purchases __ 27

4.1.1. Key players: TEKES, Digile, VTT _____________ 15

6. RECOMMENDATIONS _______________________ 28

4.1.2. ICT SHOK: Digile and its subprograms _________ 15

6.1. Introduction: building a basis for Recommendations _ 28

4.2. Future trends introduced ___________________ 16

List of tables

6.1.1. Market channel according to product type and the ICT

7.2.1. List of key organisations ___________________ 35

market in Finland ___________________________ 28

7.3. Regulatory bodies ________________________ 37

6.1.2. Choosing a channel for your product __________ 28

7.3.1. Background: enabling business opportunities ____ 37

6.2. Background and recent developments ___________ 28

7.3.2. Regulation of electronic communications: Ficora __ 37

6.2.1. A wave of spinoffs and start-ups _____________ 29

7.3.3. Data ombudsman _______________________ 38

6.3. Target sub-sectors and market opportunities ______ 29

7.3.4. Data centre related regulations ______________ 38

6.3.1. Software and services market _______________ 29

7.3.5. Regulation for medical devices ______________ 38

6.3.2. eGovernment __________________________ 29 6.3.3. eHealth endpoint devices __________________ 30 6.3.4. IT security/Cyber security market ____________ 30 6.3.5. Mobile applications market_________________ 31 6.3.6. Creative/Video Games Market ______________ 31 6.3.7. Telehealth/e-health ______________________ 32 6.4. Recommendationssummarised _______________ 32 6.4.1. Generic recommendations _________________ 32 6.4.2. Special attention: data centre opportunity _______ 32 6.4.3. Special attention: Finland’s start-ups __________ 32 6.5. Market entry strategies _____________________ 33 6.5.1. Introduction ___________________________ 33 6.5.2. Direct _______________________________ 33 6.5.3. Indirect ______________________________ 33 6.5.4. Publicly funded expert help ________________ 33 6.5.5. Market and trading risk factors ______________ 34 6.5.6. Success factors _________________________ 34 6.5.7. Conclusions ___________________________ 34

7. DIRECTORY OF USEFUL CONTACTS __________35 7.1. Government organisations ___________________ 35 7.1.1. List of ministries ________________________ 35 7.2. Trade, membership and professional organisations __ 35

8. CONCLUSIONS ____________________________ 39 9. ABBREVIATIONS USED IN THIS REPORT_______ 40 10. PROFILE OF REPORT AUTHOR ______________ 40

1. Executive Summary Finland has a strong and influential ICT sector, demonstrating the highest innovation growth for knowledge-intensive services among the EU member states and impressive growth rates in the areas of community trademarks as well as license and patent revenues from abroad. Thanks to improvements across the board, Finland ranks 1st in the Network Readiness Indicator (NRI) 2013, overtaking Singapore and Sweden. The World Economic Forum ICT Report ranks Finland 3 rd in networked country and according to the UK-based Economic Intelligence Unit, Finland is the 4th competitive digital economy in the world.

However, as many other countries, Finland has experienced economic turmoil. Thanks to its macroeconomic and social stability, the Nordic country has been able to absorb at least some of the difficulties it had to face. At the same time, the comparably large ICT sector has been affected by sudden changes related to the reorganization of Nokia, which has had an immense impact on the entire Nokia-driven eco-system of companies. As Nokia’s contribution to Finland GDP was 4% at its peak, this downturn in the Nokia cluster is hurting the ICT industry and also related domestic market, because even though ICT investments are planned for e.g. making the public sector more effective, public sector budgets are being cut. The accompanying difficulties have been further exacerbated by technology disruptions and globalization.

In the middle of the tougher times in the ICT market, there are signs of a new Finland being born with new business opportunities. There is a rich startup scene, there are growing companies in areas of e.g. gaming, Internet of Things, smart machines and foreign companies like Intel, Qualcomm, NVidia and Samsung have established R&D centers in Finland. Google, Yandex and Microsoft have chosen Finland as the location for their massive data centers. ICT and related services are seen as an ongoing and sustainable key engine for growth in the Finish market. Finns are extremely open-minded when it comes to the deployment of new technologies and overall ICT literacy is very high. Also, the transition of the Finnish ICT landscape has created numerous opportunities for SMEs formerly crowded out by the big players.

Swiss SMEs interested in a market entry in Finland will profit from well-established distribution channels and a buzzing startup scene with international success stories, e.g. Angry Birds. The public sector is actively supporting ICT as national strategic focus area and Finland provides a politically stable, good environment for areas such as IP protection. Exportoriented companies meet the best availability of qualified scientists and engineers in the world, where the latest reorganization at Nokia has contributed to a supply in skilled workforce. At the same time, labor costs in Finland are lower compared to the other Nordic countries.

In this report, a number of sub-sectors of the Finnish ICT industry are reviewed in some detail. On the one hand, the report will look at business opportunities in these areas. Also in the following fields, there are a number of Swiss companies with exhibited expertise:      

Cloud Computing Services Mobile Technologies IT Security solutions Creative/Video Gaming Industry E-Government solutions Telehealth/E-Health solutions

Finland offers numerous interesting business opportunities for Swiss companies, benefiting from the positive image of Switzerland, which is attributed to cutting edge technology. Furthermore, Finnish companies are actively looking for complementary technologies and market access. In conclusion, undertaking appropriate research and seeking local advice at each step of the process is key for successfully entering the Finnish ICT market. S-GE is a partner for the strategic access into this interesting market. With the key findings of this ICT study in mind, any Swiss company with a strong expertise in one or several of the indicated areas should be able to evaluate their individual access to the Finnish ICT market.

2. Introduction 2.1. INTRODUCTION TO FINLAND AND ITS ICT SECTOR 2.1.1. Current economic situation Finland has a population of 5,5 million people, which makes it significantly smaller than the UK (63,0 million) and Germany (80,2 million in 2011) and consequently, the ICT market size is smaller too.

Finland is however open-minded when it comes to deploying new technologies and this is reflected in its ICT sector, which is a very important area for the Finnish economy. For example, the share of Internet related hardware, software and services has reached 9% of Finland’s GNP, which is higher than e.g. in Sweden or the US.1 Finland is experiencing relatively tough times in the economic sense. The seasonally adjusted volume of the gross domestic product has either decreased or remained unchanged for four quarters in a row. Thus, the economic recession has continued in the first quarter of 2013 as well. GDP has last grown in the first quarter of 2012, when, in addition to other factors, the peak in motor vehicle sales caused by the vehicle tax revision had helped boost GDP.2 The national trade balance is an important measure to illustrate the situation in Finland’s economy. It turned negative in 2011, after 19 positive years during which exports had exceeded imports.

On the other hand, Finland has a stable society. As a telling measure of its macroeconomic stability, Finland enjoys the highest possible status with the global credit rating agencies Fitch Ratings, Moody’s and Standard & Poor’s.

According to the latest report from Fitch, Finland’s AAA status “is underpinned by sound public finances, a solid external position, high income per capita, demonstrable political and social stability and an impeccable debt service record”.

2.1.2. Building a new vision for the Finnish ICT industry In Finland, the public and private sectors often work closely together in areas important to society. With the challenges ahead, the Ministry of Employment and the Economy organised the ICT 2015 work group. The group was formed in 2012 to tackle the sudden disruptions in Finland’s ICT market and prepare for future competitiveness. The work covered enhancing productivity using ICT in the public sector, too. The work group was chaired by ex-Nokia CEO Pekka Ala-Pietilä and produced its final report in February 2013.3 The main conclusions and proposals were:  Finland’s public sector should build a common IT service architecture to maximise service creation effectiveness across organisational borders.  To create a common 10-year program (ICT 2023) which targets at bringing together the crucial national actors such as universities, research institutes, companies and financing institutes.  New financing to support the emergence of growth companies.

The simple reason for raising the topic is the sudden changes in the Finnish ICT market, due to layoffs by Nokia and other companies in the Nokia-driven ecosystem. Also, technology disruption and globalisation create the need for change in Finland.

The Nokia cluster has lost 14 000 ICT jobs in only a few years. New jobs are born in SME companies. E.g. between 2002 and 2011 there were ca. 120 000 new FTE jobs created altogether and of those 110 000 were in SMEs. ICT and related services are seen as key engine for economic growth.

1 2 3

http://www.lvm.fi/tiedote/4100710/selvitys-internetin-osuus-lahes-kymmenesosa-suomen-bkt-sta (in Finnish) http://www.tilastokeskus.fi/til/ntp/2013/01/ntp_2013_01_2013-06-05_kat_001_en.html http://www.tem.fi/files/36671/TEMjul_18_2013_web_15052013.pdf (in English)

2.1.3. High rankings in education and ICT competences Finland is a very ICT literate country and the fundamental underlying factors are in place for Finland’s growth. WEF (World Economic Forum) describes Finland’s ICT competences as follows in its study on Networked Readiness Indicator (NRI)4: Overtaking Singapore and neighbouring Sweden, Finland (1st) reaches the top of the NRI rankings for the first time, thanks to improvements across the board. The country shows progress on two-thirds of the 54 indicators of the NRI and posts a very consistent performance across all categories of the NRI. Finland appears in the top three of each of the four sub-indexes and in the top 10 of nine of the 10 pillars, topping two (skills and economic impacts). Among the 144 economies, only Sweden achieves as impressive a level of excellence and consistency.

Finland’s lowest rank among the 10 pillars is its 19th position in the affordability pillar, which can hardly be considered a weakness given that, among high-income countries, ICT services in Finland are among the most affordable ones (it comes in 5th, with Iceland and Sweden leading the category). As set out in the government’s Digital Agenda for 2011–2020, Finland has set in motion a virtuous digital circle offering exceptionally conducive institutional (3rd) and business (7th) environments, world class infrastructure (2nd), and arguably one of the best educational systems in the world. As a result, ICTs are ubiquitous and penetration rates are among the highest globally. Ninety percent of households are equipped with a computer and 90 percent of the population use the Internet, mostly at broadband speeds. Finland is an innovation hub, boasting the world’s highest number of PCT applications per capita in the domain of ICTs, and the third highest when considering all domains. But the impact of ICTs extends well beyond innovation, permeating the entire economy and society. For instance, Finland ranks 1st on the indicator “Capturing the extent to which ICTs create new services and products”.

There are other studies with similar results. According to UK-based Economic Intelligence Unit, Finland ranks 4th competitive digital economy globally. The World Economic Forum ICT report ranks Finland as third in networked country globally 5.

According to WEF’s Global Competitiveness Report 2010-2011, Finland has the best availability of scientists and engineers in the world, and they are trained by one of the best educational systems in the world.

The workforce also includes a large number of other competent professionals with university degrees in diverse fields.

However, labour costs are lower in Finland compared to the other Nordic countries.

Finland’s educational system has consistently achieved outstanding results. WEF’s Global Competitiveness Index ranks the quality of the system as the best in the world. In OECD’s Programme for Student Assessment (PISA) surveys, Finnish students lead the rankings in combined learning results for science, mathematics and literacy. About a third of Finland’s working population has a degree or higher qualification.67 2.1.4. Finland has attracted foreign top ICT companies Today, as a result of the downsizing of the Nokia ecosystem, there is an oversupply of skilled ICT workers in Finland.

Consequently, globally well-known companies have spotted the opportunity and e.g. Ericsson, Huawei, NVIDIA, Samsung and Intel have established R&D operations in Finland over the past few years. There are other reasons why foreign companies have invested in Finland, too. Google and the Russian Internet company Yandex have established data centres in Finland, thanks to Finland’s infrastructure, cheap electricity and environment enabling cost-effective cooling8.

According to the European Commission‘s Innovation Union Scoreboard, high innovation growth is observed in Finland for community trademarks, knowledge-intensive services exports, and license and patent revenues from abroad. Following the scoreboard, Finland’s innovation growth for knowledge-intensive services is the highest of all EU member states. Finland’s performance in intellectual assets and innovators is also well above average.

Finland’s relative weaknesses identified by the scoreboard were in the categories for the number of non-EU doctorate students, innovative small and medium enterprises collaborating with others, and small and medium enterprises innovating in-house.9

4

http://www.weforum.org/reports/global-information-technology-report-2013/ http://www3.weforum.org/docs/WEF_GITR_Report_2013.pdf http://www.investinfinland.fi/why-finland/competent-professionals/11 7 http://digi.fi/files/2012/03/TT_RankedFinland_32012.pdf 8 http://www.google.com/about/datacenters/inside/locations/hamina/ 9 http://ec.europa.eu/enterprise/policies/innovation/facts-figures-analysis/innovation-scoreboard/ 5 6

3. Market Analysis of the Finnish ICT Sector 3.1. HISTORICAL REVIEW 3.1.1. From Nokia and GSM to Linux and Windows Phone The pragmatic attitude of Finns in making things happen in ICT is perhaps best illustrated by a simple story. In the late 80s, the Finnish Ministry of Trade set up a rule that only open Unix servers should be acquired for the public sector, unless there was a compulsory reason to buy a minicomputer, which was popular at the time. Consequently, at the University of Helsinki, an unknown researcher named Linus Torvalds and his team had access to a Unix computer, but not to the Posix documentation, which they could not afford. Mr Torvalds took a look at Sun Solaris and proceeded to work on an operating system of his own. This is how the world-famous open-source operating system Linux was born.

Finland has consequently developed a rich open-source and Internet culture, which has produced e.g. the most popular opensource relational database system MySQL and has laid the foundation for several Internet companies.10 Nokia is obviously the most important actor in the history of ICT in Finland. In 1987, Nokia pulled off a huge marketing win, by having Soviet Union leader Mikhail Gorbachev pictured as using a Mobira Cityman to make a call from Helsinki to his communications minister in Moscow. This led to the phone's nickname "Gorba".11 Nokia was one of the key developers of GSM (Global System for Mobile Communications), which later became the dominating 2G cellular system with over 700 operators globally. Nokia became Finland’s shining star in the Finnish ICT sector. The company was the world's largest vendor of mobile phones from 1998 to 2012, with a ca. 40% peak global market share and major market share also in mobile networks. However, over the past five years its market share declined as a result of the growing use of touchscreen smartphones from other vendors—principally Apple’s iPhone, and devices running on Android.

In 2011, Nokia alone accounted for 0.5% of the Finnish GDP. However, in 2000 the figure was four percent, according to calculations by the Research Institute of the Finnish Economy (ETLA)12. In a bid to recover, Nokia announced a strategic partnership with Microsoft in February 2011, leading to the replacement of Symbian with Microsoft's Windows Phone operating system in all Nokia smartphones. Following the replacement of the Symbian system, Nokia's smartphone sales figures, which had previously increased, collapsed dramatically. From the beginning of 2011 until 2013, Nokia fell from its position as the world's largest smartphone vendor to assume the status of tenth largest.

In the Nokia-centric history of Finnish ICT, it must be highlighted that the two fundamental technology trends of mobility and open source converged in Nokia’s Meego operating system which had its roots in Linux. Nokia abandoned the Meego product roadmap when it partnered with Microsoft. But the know-how has not left Finland. Today, Finland-based Jolla’s operating system is of the same technological roots as Meego.

10 11 12

http://en.wikipedia.org/wiki/MySQL http://www.youtube.com/watch?v=5IH70w-WLBQ (starting at 0:26) http://www.hs.fi/english/article/Experts+analyse+deep+impact+of+Nokia+decline/1329104318689

3.2. IMPORTANT MILESTONES IN FINNISH ICT AFTER THE YEAR 195013 1952 Olympic Games in Helsinki, the capital of Finland. Helsinki Telephone Company builds an Olympic telephone network with four exchanges.

1967 Nokia Corporation is formed through the merger of Nokia Company (the original paper manufacture business) with the Finnish Rubber Works and Finnish Cable Works.

1971 An analog radio phone network ARP, which functions in the frequency of 150 MHz, is taken into use.

1979 The digital age of Finnish telecom begins. The first optical fibre connection is taken into use in Helsinki, the capital of Finland.

1980 - 1987 Finnish telephone operations are opened up broadly for competition, considerably earlier than in the rest of Europe.

1982 EUnet, the first Finnish Internet service provider, is established. The first generation mobile phone network NMT-450 is taken into use.

1986 The NMT-900 mobile phone network is introduced.

Finnish Jarkko Oikarinen develops IRC, Internet Relay Chat. IRC enables real time conversations on the Internet between users all over the web.

1991 Year of "The Digital Big Bang". Finland's Prime Minister Mr Harri Holkeri makes the first GSM call in the world. Finnish Linus Torvalds releases the first version of the operating system Linux.

1992 The second generation digital GSM mobile phone network is taken into use.

1993 The first GSM text message is sent by Finnish engineering student Riku Pihkonen.

1996 Finland Post and Tele of Finland are separated. The number of GSM phones exceeds that of NMT phones.

1999 The convergence in the ICT sector deepens.

2007 Nokia reaches 40% global market share in mobile devices 2011 Nokia makes a deal with Microsoft with dramatic impact in smart phones market share 2013 Nokia sells it mobile device business to Microsoft

13

http://www.ficom.fi/ict/ict_2.html

3.3. OVERVIEW 3.3.1. Finland’s regional ICT clusters Finland has several regional ICT clusters which call for separate attention. Below, Helsinki Capital Area, Tampere and Oulu are introduced in more detail. Also, Salo/Turku and Jyväskylä call for attention.

3.3.1.1. Helsinki Capital Area region A major share of Finland’s ICT activity is based in the Helsinki Capital Area, which together with neighbouring towns of Espoo and Vantaa has a population of ca. 1 million.

There are 5000 researchers, 16 000 high-tech professionals and 800 high-tech companies of which 100 are of foreign origins in Helsinki Area. Helsinki/Espoo is home to 50% of Finland’s total R&D investment.

Aalto University has both technical, design and business faculties and is home to 20 000 students. Also, VTT (Technical Research Centre of Finland) has significant R&D activities in the region. Aalto University, University of Helsinki, VTT and the lively business scene have contributed to the emergence of a lively startup culture. An example of this is Start-up Sauna, which is closely associated with Aalto University. Start-up Sauna is the largest student-run entrepreneurship community in Europe.

In the start-up scene, e.g. several Red Herring Europe or global winners are based in Helsinki/Espoo.

Northern Europe’s biggest start-up show Slush14 is held in Helsinki in November.

The rich gaming industry with world-famous companies like Supercell and Rovio have emerged from the ecosystem.

Over the past years, e.g. Intel (ca. 200 people), NVIDIA and Samsung have opened R&D centres in the Helsinki Capital Area.

3.3.1.2. Tampere region Tampere region has a population of 495 000. Technology industries employ 34 000 people in more than 1000 companies. The ICT sector alone employs over 10 000 people and half of these are working in the mobile cluster with companies like Nokia, Nokia Solution Networks and Intel playing a significant role in the region.

Tampere region has almost 50 years of history and cumulated competence in information and communication technology. The first “smart phone”, the Nokia 9000 Communicator and the revolutionary 41-megapixel camera phone Nokia 808 PureView are just a few examples of mobile innovations born in the Tampere region.

Renewal capability and a versatile company base have been the key ingredients in developing and utilising new information and communication technologies in different industries, e.g. intelligent machines and intelligent traffic systems.

Intelligent Machines is one of the industries in the region, which benefit from the strong ICT cluster. Intelligent machines are machines and machine systems, in which the added value brought by information technology, electronics, software and communications is notable. By utilising and increasing top expertise, the cluster aims to answer the industry’s biggest future challenges by developing technology, business models, innovation environments, competitiveness and efficiency.

Tampere region is home to 10 globally operating world market leaders in their own market segment. Companies like Cargotec, Sandvik and AGCO Power have seen the opportunities in the region. Cargotec recently finished the construction of a new site that can host an extensive five hectare test area, in order to facilitate the testing and simulation of various solutions, including unmanned equipment and fleets, navigation systems and remote steering and control.

Tampere region is also the place where creative industries and ICT meet. The gaming business is a good example. The region has over 40 gaming companies including companies like Rovio, Colossal Order and 10tons. In the future, Tampere will have a “media hub” called Mediapolis15, which is an international campus in Tampere that concentrates on content production and information & communications technology. Companies and students work side-by-side in an energetic atmosphere, creating their own stories while utilizing different mediums. Mediapolis’ high technology and sense of community provide a productive frame for success.

14 15

http://slush.fi/ http://www.mediapolis.fi/en

3.3.1.3. Oulu Oulu region has 250 000 people, and is a one-hour flight away from Helsinki. Oulu is known for its high R&D focus, being ranked 5th in EU in the respective area (10% of GDP R&D related, vs. EU average 3%).

Fortune has ranked Oulu among the 7 Best New Global Cities for Startups.

Oulu was the only European city to be a top 7 finalist in the Intelligent Communities of the World Awards 2012, and has again been nominated for the top 7 for the 2013 awards.

In the ICT sector, Oulu region has 650 companies and 10 000 employees.

The Nokia cluster downturn has hit Oulu especially hard: in 2009, there were 17 000 people employed by ICT industry. On the other hand, there are new companies entering Oulu, to utilize its valuable resources.16 Oulu has a remarkable know-how cluster in mobile and embedded technologies. There are several companies capable of creating a mobile device or table. Examples are Aava Mobile who has produced a tablet for vertical markets, Creoir, Haltian and Elektrobit.

The key focus area in Oulu is utilizing ICT in all walks of life:  Significant health and life science investments, for example, 500 million EUR investment in a new hospital  Comes from adding wireless intelligence to healthcare, industry, social services  Integrating intelligence into all parts of life  Intensive collaboration between companies, public sector and higher education  Collaboration aims at development and new innovations It is important to note that Oulu is home to the Onion project, which targets implementing future mobile hospital and related diagnostics and social welfare systems.

3.3.1.4. Other notable ICT regions: Jyväskylä and Salo Other notable regions are Jyväskylä and Salo.

Jyväskylä specialises in technology-based growth business, mobile data communications, multichannel services and applications, user-driven design, analysis and measuring tools. Salo’s focus areas are health and well-being technologies, wireless data transmission, wireless end-equipment, technical testing and development environments, industrial systems17

16 17

Source: Business Oulu http://www.ubi.fi/in-english/competence-cluster/regional-profiles.html

3.4. SWOT ANALYSIS OF THE FINNISH ICT MARKET 3.4.1. Background of the SWOT analysis With a population of 5, 5 million, Finland does not position as a large ICT market. Also, the downturn in the public sector economy will likely impact ICT markets negatively.

However, as indicated in e.g. the WEF study, the business environment, infrastructure and “general IT Literacy” are at high levels in Finland. Also, there is a range of export oriented companies in e.g. machinery who have embedded ICT in their product offering.

Also, due to the recent downturn in the Nokia ecosystem, there is a major oversupply of skilled ICT personnel in Finland.

3.4.2. SWOT matrix for the Finnish ICT market

Strengths 1. Early adopters of new technology & design, high IT literacy.

2. Oversupply of ICT skills, also in embedded systems for e.g. machine building.

3. Open, transparent market inside EU and close to Russia.

4. Established distribution channels.

5. Buzzing start-up scene with international success stories in e.g. gaming.

6. Public sector actively promoting ICT as national strategic focus area.

7. Politically stable, good environment, e.g.

IP protection.

8. Corruption-free, minimal bureaucracy.

Weaknesses

Opportunities

Threats

1.

2.

3.

4.

5.

6.

Proven eagerness to deploy and “EU proof” new products and services.

Utilise or create market disruptions in selected areas as Finns eagerly deploy new technology.

Finnish companies actively looking for complementary technologies and market access channels and partners.

Good country brand of Switzerland in high technology.

Wide interest in supporting international business relationships by public sector Open source trend opening market opportunities possibly.

1.

2.

3.

4.

5.

6.

Small population and smallish domestic ICT market in EU. Currently underutilised ICT workforce.

Squeeze in public sector finances impacting also some ICT sectors, economic downturn.

Public sector ICT markets and value chains seem mature and difficult to enter Strong established vendors in some ICT subsectors slowing down evolution.

Long lead times needed for commercial success for certain product types which may fit Finnish market demand.

1. Competition from low-cost countries.

2. Unclarity to what extent the public sector ICT strategy will get implemented.

3. Nokia no longer technology leader. Need to find new leaders.

3.5. STATISTICAL DATA 3.5.1. Sources of statistical data There is a range of statistical data available on the Finnish market. Various reports cover Finland as part of the Scandinavian market. MarketVisio18 represents the American information technology research and advisory firm Gartner in Finland. The tables below are retrieved from MarketVisio.

3.5.2. Finland’s total IT The uncertain financial outlook burdens the IT market growth. In table 1, the market is described in an end user oriented approach, meaning what end-user organisations and consumers spend on hardware, software and services.

In the software sector, it is forecasted that there will be a 6-9% growth in business intelligence and data warehouse software.

The market for those areas is expected to grow from 71 million euros in 2011 to over 90 million euros in 2015.

Table 1: Finland’s total IT market 2011-2014

Hardware (millions of euros) Growth (%) Software (millions of euros) Growth (%) IT-services (millions of euros) Growth IT market (millions of euros) Growth

2011

2012

2013

2014

1498

1523

1530

1521

1,6

1,7

0,5

-0,6

1208

1243

1276

1324

4,1

2,9

2,6

3,8

2985

3063

3147

3241

3,3

2,6

2,7

3

5691

5829

5953

6086

3

2,4

2,1

2,2

Sources: Market Visio (06/2013)

3.5.3. Finland’s IT services market In Finland’s IT services market, application management services are forecasted to grow fastest, at a rate of ca. 6-7% annually.

This is a logical consequence of more and more Finnish companies realising that the running their own servers and related software is a non-strategic issue.

Table 2: Finland’s IT services market 2011-2014

2011

2012

2013

2014

IT consulting (millions of euros)

227

234

240

247

Growth (%)

3,4

3,17

2,8

2,7

784

805

827

850

Development/integration/deployment (millions of euros)

18

http://www.marketvisio.fi/en/

Growth (%)

4,1

2,7

2,7

2,7

Maintenance/support (millions of euros)

206

213

222

229

Growth

3,5

3,4

4

3,4

Hardware support (millions of euros)

282

280

278

277

0

-0.7

-0.7

-0.4

1349

1394

1441

1497

Growth (%)

3,5

3,3

3,4

3,8

Application management (millions of euros)

359

383

408

437

Growth (%)

7,3

6,7

6,5

7

IT infrastrucuture services (millions of euros)

990

1011

1033

1060

Growth

2,2

2,1

2,2

2,6

IT training(millions of euros)

138

137

137

143

Growth

2,6

-0,1

1,2

2,5

2985

3063

3147

3241

3,3

2,6

2,7

3

Growth Management/network services (millions of euros)

IT services total (millions of euros) Growth

Sources: Market Visio (06/2013)

3.6. KEY MARKET ENTRY POINTS 3.6.1. Entering the Finnish ICT market19 In general, entering the Finnish market is similar to entering the market of many other EU countries. It can be assumed that everyone speaks English.

When entering the Finnish market, one should consider ones goals, the market positioning of ones product and the aspired starting point.

High-tech companies respond fairly well to queries sent over the web, when the business proposition is clearly outlined.

Naturally, face-to face meetings should be organised with the help of door openers. Switzerland Global Enterprise or the local Swiss Embassy can always assist. Contacts can also be initiated at tradeshows, industry association events or similar happenings. If Swiss companies let Switzerland Global Enterprise or the Trade Officer of the Swiss Embassy know upfront that they intend to visit a fair on-site, if possible a brief introduction on-site can be organized.

The following chapter will further illustrate the key market entry points to the Finnish ICT industry.

19

http://www.investinfinland.fi/services/entry-alternatives/34

4. Future trends across all ICT sectors 4.1. HOW FUTURE ICT TECHNOLOGIES ARE DEVELOPED IN FINLAND 4.1.1. Key players: TEKES, Digile, VTT Finland has seen the need to develop ICT technologies, but it has traditionally lacked private capital, e.g. VC funding.

Consequently, Finland has organised public sector support for development of relevant technologies by bringing together private sector companies, research institutes and funding parties.

Key actors in building Finland’s technology strategy are: SHOKs (Strategic Centres for Science, Technology and Innovation) carry out long-term cooperation in fields most crucial for the future. The targeted results are breakthrough innovations of global importance, which can be agilely transformed into growth in business life and wellbeing in society. Typically, the most important companies in Finland participate in SHOKs. TEKES – the Finnish Funding Agency for Technology and Innovation finances the development of innovations that aim at growth and new business operations. TEKES funding may align itself more tightly with private funding players in the near future.20 VTT (Technical Research Centre of Finland) is a globally networked multitechnological applied research organization. VTT provides high-end technology solutions and innovation services The role of VTT (Technical Research Centre of Finland) is described well by the WEF: Becoming a digital market maker requires policymakers first to adopt a holistic ecosystem perspective. ICTs range beyond basic infrastructure, and policymakers need to look at a multi-layered ICT ecosystem categorized in 42 buckets to understand what role they need to play in each to enable creation of digital markets (Figure 3). Where the private sector does not have sufficient incentive to undertake the development of critical digital infrastructure, the state needs to play the role of a developer, becoming a participant in the market—either directly or through a public-private partnership. Finland, for example, has developed the VTT Technical Research Centre, which provides multidisciplinary research and development services to both the public and private sectors.21 4.1.2. ICT SHOK: Digile and its subprograms Finland has organised so-called SHOKs or Strategic Centres for Science, Technology and Innovation, to carry out long-term cooperation in fields most crucial for the future. The results are breakthrough innovations of global importance, which can be agilely transformed into growth in business life and wellbeing in society.

ICT know-how is based in Digile.22 Digile in turn has six research programs, e.g. on the Internet of Things. For Big Data, Data-to-Intelligence is the relevant actor with a budget of ca. 40M euros for four years and with tens of companies and ten research institutions participating. The goal is to bring universities, the public sector and privately held companies together.23 There are examples of actual results, e.g. Packet Video has created a system to analyse video images in real-time.

Access to specialized know-how can be found via Digile.

20

Pekka Soini, CEO of Tekes, in KAATO organized event in August 2013 http://www3.weforum.org/docs/WEF_GITR_Report_2013.pdf http://www.shok.fi/en/; http://www.Digile.fi/ 23 http://www.datatointelligence.fi/ 21 22

4.2. FUTURE TRENDS INTRODUCED 4.2.1. Cloud computing Cloud computing has enabled a number of new productivity and entertainment applications.

In Finland, a major number of start-ups and ICT companies build their offering utilising cloud technologies.

Cloud computing has led to a growing demand for centralized computing and in data centres and Finland has become the home of well-known multinationals. Google has announced an extension of their data centre based in the town of Hamina.24 Russian Internet search company Yandex is building their data centre in the town of Mäntsälä. In August 2013, Microsoft announced that they would be setting up a data centre in Finland.

Key drivers for companies setting up their data centres in Finland are cheap electricity, stable ground, and proximity of the Russian market. Also, several high-speed fibre-optic connections link to FICIX, the main Finnish Internet hub.25 Also, recent incidents have raised consumer awareness of data privacy and EU regulation, which supports the trend of locating data centers within the EU. One reason why Finnish ICT companies find migration to cloud computing smooth is that the 90s’ work station oriented clientserver model had not been perceived as attractive. Therefore, the transformation to a browser-based model and the preparation to deliver as service was embraced naturally at an early stage.

There is Finnish expertise in e.g. B2B application verticals, such as personnel management and access management. This in areas where there is a requirement for proprietary access management, making the field more difficult for generic multinational providers. Also, the fact that in many cases the data repository has to be inside the EU is considered a market advantage.

4.2.2. Open data Finland has an opportunity regarding open data and data masses. Data is like raw material, which can be utilized for new services and business. There are several data stores in Finland, which are either being opened these days or will be opened, examples being in geographic data, statistics or data produced in research programs. The efforts are collected under KIDE, targeting Finland as “world’s most intelligent system”. The efforts are funded by the state agencies TEKES and SITRA as the topic calls for investments in data analysis and algorithms.

An expert pool and developer model in accordance with Code4Europe will be created.

The ICT2015 report also calls for legislative and regulatory support for the utilization of open data.

4.2.3. Big Data So far, Big Data has been a US-driven trend. However, according to our interviewees, there are signs that Europe and Finland are catching up.

One important factor in this regard is the emergence of open source technologies like Hadoop, which are being deployed more cost-effectively than closed source systems. Secondly, in the US, many industries have already been disrupted by the Internet, e.g. the media industry. Now, the disruption is spreading to Europe, attracting attention to Big Data. In many industries, national political issues are also coming into play.

On the other hand, one key issue is that organisations today are dealing with structured relational databases. The key question is how to integrate these systems with the Big Data systems, which typically process huge flows of unstructured data.

In Finland, Big Data is a key topic to several companies working with telecom operators. Examples are Nokia Solutions and Networks, Comptel and Tecnotree.

Also, an important driver for Big Data in Finland is pressure to develop national health care.

In Digile, the Big Data topic is covered by the D2I program.

The D2l program focuses on Big Data, data reserves and user-centric service development. The aim of the program is to develop intelligent tools and methods for managing, refining and utilizing diverse data. The results enable innovative business models and services.26 24 25 26

http://www.investinfinland.fi/articles/news/ict/data-centre/google-builds-new-data-center-machine-hall-in-finland/45-979 http://slashdot.org/topic/datacenter/yandex-to-build-data-center-in-finland/ http://datatointelligence.fi/partners

The D2I program involves 27 companies and 10 research institutions.

4.2.4. Mobile technologies and Internet of Things 4.2.4.1. Mobile technologies In this report, the term “mobile” refers not only to mobile devices or applications, but also to the emerging topics of the Internet of Things and MEMS (Micro Electro Mechanical Systems), as well as M2M communications.

Nokia is the most famous brand originating in Finland. The range of mobile applications available in various application stores today is huge, but there is also a trend towards hardware modules. Although mobile phones have an exciting range of accessories, the central module increasingly isn’t a mobile device, but e.g. a pulse meter.

As a Nokia legacy, there are several companies in Oulu, which are capable of designing mobile phones or tablets.

Certainly, the industry has seen the huge impact on consumer markets with the emergence of smart media tablets, but more and more often organizations are starting to capture the opportunities in the Connected World. For enterprises, applications and systems such as CRM & Sales order capture, Inventory & Warehouse Management and Field Service are increasingly being delivered and integrated with mobile services, but also extended to knowledge workers, with mobile services such as time reporting distributed through private enterprise application stores.

The Internet of Things trend is ensuring that everything will have a URL address and accelerate the connected world. This change coupled with new emerging technologies will provide great opportunities for organizations to not only distribute the current business processes in a mobile channel, but rather improve or transform them. New ways of doing business and working will be the result. Digital will continue to change businesses and transform industries.

As an example of Finland’s know-how in the Internet of Things topic, the UK-based ARM acquired Finnish company Sensinode in August 2013.27 4.2.4.2. Microsystems and MEMS Microsystems are used in e.g. cars, health care and mobile devices. The Finnish business is worth about 1B euros. It has been recognised as strategic area for Finland since the 1970s.

Microsystems offer a way to add intelligence to almost any product or service and thus provide added value or increase competitiveness.

MemsCat is a partnership devoted to help you in finding this added value and to integrate the intelligence into your products or services.

Essential part microsystems are MEMS (Micro-Electro Mechanical Systems) components where mechanical properties can be used to carry out electronic functions, or whose superior mechanical properties combined with micro-size is taken directly advantage of. Typical MEMS components are different sensors (accelerometers, pressure sensors and microphones), which are already used or could be used, for example, in mobile phones, cars, as well as medical and well-being applications and in environmental monitoring.

The Finnish microsystems industry has a turnover of more than € 500 million and the companies range in size from small to large. Already today, the microsystems based business directly employs thousands of people in Finland. However, the potential to create an additional large number of new companies and jobs requiring skilled labour is very high.

4.2.5. Social collaboration Finland has high penetration in using social networks like Facebook and Twitter. At the same time, social network is being integrated into popular applications in areas like gaming and fitness.

Due to network effects as well as high IT literacy and English-language skills, Finnish social networks have either lost market share or disappeared totally.

Social interaction is increasing in B2B and B2C applications, for example in posting game scores and in gamification concepts.

27

http://www.arm.com/about/newsroom/arm-acquires-sensinode-oy-to-accelerate-the-internet-of-things-and-support-30-billion-connected.php

4.2.6. Software and services market 4.2.6.1. Major Finland and overseas players Three major international companies seem to be strong in Finland’s IT system integration market with market shares totalling 48%28.

Suomen suurimmat IT-palveluiden tarjoajat 201

Tieto 23% Logica 14% Fujitsu 11% In systems integration, other players are Accenture and IBM. Recently, Indian companies e.g. Mahindra Tech and Wipro have announced plans to set up offices and employ over 100 members of staff in Finland. Of the Finnish players, Digia is notable.

When it comes to Finnish software companies (outside of IT security sector), major players are Affecto, specializing in information management and business analysis, and BasWare in the area of electronic payment solutions.

4.2.7. eGovernment 4.2.7.1. Introduction The public sector in Finland has improved its strategy for exploiting ICT, which is vital for its competitiveness. In the UN’s most recent eGovernment survey, Finland moved up to ninth in the ranking of countries’ willingness and capacity to use ICT, an improvement of ten positions.

A Public Sector ICT Strategy published in the autumn of 2012 seeks to answer demands of modern administration.

In Finland, the independence of ministries and autonomy of municipalities has led to a fragmented service architecture.

However, building an efficient ICT infrastructure is possible under current legislation. The process is supported by the Data Administration Act, which came into force in 2011, providing for a possibility to steer the interoperability of all public-sector information systems.

The current, fragmented information system landscape can be replaced with national service architecture, as has been done in Estonia.

One of the most crucial steps in the creation of an efficient ICT infrastructure will be the creation of a comprehensive national electronic identification system.

A critical target is to produce a uniform, national service architecture providing open interfaces to all systems that need it.

Also, there is a need to build infrastructure required by real-time economy. 29 4.2.7.2. Public Sector ICT Strategy It is to be expected that Finland will reorganise its public sector ICT in the future. .

In January 2012, the Ministry of Finance set up a project to devise a strategy for the utilisation of common ICT throughout public administration. The formulation of the strategy was chaired by the Ministry of Finance as an open process, with hundreds of people from public administration, business enterprises and NGOs taking part. The vision in the strategy reaches to 2020, and policy approaches and measures to the end of 2015. The strategy highlights why smoothly functioning ICT is crucial for the operation and development of public administration.

The Government aims at developing public sector ICT by means of the following actions (reference to the Government Programme of 22 June 2011)30:  The development of public online services will be placed under the management of a full-bodied actor.  Clear goals will be set for productivity improvements.  The interoperability of public information systems will be ensured through the use of open interfaces and standards.  The implementation and effectiveness of the project entities of the Electronic Services and Democracy Development Programme will be evaluated.

28 29

30

Market Visio, 06/2012 ICT2015 report , Networked Readiness Index http://www.vm.fi/vm/en/05_projects/01_ICT/index.jsp

    

Productivity in the public sector will be boosted through better utilisation of business intelligence, more compatible information systems, and by bringing together information management data and procurement resources data in public administration.

Shared use of public administration information will be facilitated.

All common functions of the State ICT service centres will be brought together.

To promote interoperability of information systems, open source standards are used in public administration, which determine the compatibility of information content and IT interfaces.

Enterprise architecture will be employed, utilising shared information platforms and shared eGovernment platforms and eServices.

4.2.8. IT security (cyber security) market 4.2.8.1. Trends in IT Security The major recent market trend in IT security is that the consumer is increasingly becoming aware of the risks created by hackers, cybercriminals and various governments.

This is seen to favour IT security solutions emerging from “neutral” countries like Finland.

Also, the bring-your-own-device (BYOD) and cloud computing trend is creating challenges for IT security solutions.

Companies may have their own private clouds, but employees may also utilize e.g. Dropbox as part of their work.

Consequently, protecting company computer hard drives and memory sticks is not enough anymore. There is a lot of demand for innovative products and services in this area.

4.2.8.2. IT Security in Finland The most important Finnish companies are organised in the Finnish information security cluster (FISC) which was founded in 2012. Finland disposes of a deep know-how in information security, which was illustrated in the acquisition of Stonesoft by US major information security company McAfee.

There are about 50 companies employing over 2000 people in this area. However, a lack of competence and the small size of the companies are seen as bottlenecks.31 Finnish companies and individuals are well known for their inventions and efforts to improve security. Together with excellent competencies on mobile and open source technologies, this gives a unique stand point for companies with Finnish operations.

Finland also has a national brand of creating trustworthy, reliable and efficient operations and companies. This gives FISC members an excellent starting point when creating their products and serving their customers. SMEs concentrating purely on information security technologies, as well as large multinationals having information security related operations in Finland, are welcomed. The main target of FISC is to support its member organisation activities in the following areas: expansions to international markets, depth and width of high-level education and dialogue with national and international regulatory bodies.

FISC is managed by a Board of Directors representing the different member organisation types. It belongs to the Federation of Finnish Technology Industries and co-operates with all relevant national IT and security related institutions.32 4.2.8.3. Government Cyber-Security Initiatives The ICT2015 report outlines, that according to the National Cybersecurity Strategy, a national cyber security centre should be established.

The new centre should follow cyber security threats and support authorities. Also, it should act as a partner for Finnish companies supporting cyber security technologies.

The Ministry of Transport and Communications is responsible for legislation and strategy development concerning information security in communications networks and services. Information security refers to the administrative and technical measures that ensure the confidentiality and integrity of information and the usability of systems.

The mission of information security policy is to ensureconfidence of the general public, businesses and government in security and privacy protection of services provided in the information society. The trust is based on aspects such as user-friendliness, adequate privacy protection and genuine content.

The Finnish Communications Regulatory Authority, FICORA, acts as the national authority for information security.

31 32

http://www.tem.fi/files/36671/TEMjul_18_2013_web_15052013.pdf www.fisc.fi

A Government resolution on the national information security strategy was adopted in December 2008. The Strategy focuses on three priorities: basic skills in the ubiquitous information society; information risk management and process reliability; and competitiveness and international network cooperation.

The action plan for the information society strategy was approved in November 2009. The plan included the launch of nine key projects that focus on new and topical information security issues and the improvement of existing operations and functions.

CERT-FI is the national information security agency operating as part of FICORA whose task is to prevent, detect and resolve information security violations and to provide information about information security threats. 33 4.2.8.4. Major Finland and overseas players Major IT security companies are members of the Finnish Information Security Cluster.

As a proof of Finnish know-how, the IT security company Stonesoft was acquired by US-based McAfee in 04/2013.

The exchange-listed F-Secure and SSH are major IT security companies.

F-secure provides internet security and content cloud services through over 200 operators in more than 40 countries around the world. F-Secures operator partners are e.g. AT&T, BT, Telefonica, Orange, SFR, KPN and PCCW. F-Secure’s total revenues in 2012 were 157.2 million EUR. SSH Communications Security is the company that invented the SSH protocol - the gold standard protocol for data-in-transit security solutions. Today, over 3,000 customers across the globe, including 7 of the Fortune 10 use SSH’s Information Assurance Platform to secure the path to their information assets.

Of the smaller players, Envault, Blancco and Codenomicon are interesting.

Envault has developed a patented password-free encryption method for protecting easily e.g. e-mails and attachments or the cloud. The idea is simple: a confidential document is protected by first encrypting it and then removing small random parts of it to another location. As a result, the document becomes unreadable noise that does not contain enough information to reconstruct the original document or any readable parts of it, guaranteeing its confidentiality.

Envault has its roots in VTT (State Technical Research Centre).

Blancco’s advanced data erasure technology ensures that data is securely erased from all types of IT assets, enabling clients to comply with global security and privacy regulations.

Codenomicon develops security and quality testing software, which allows users to efficiently find and fix both known and unknown flaws in software. The approach identifies the weaknesses and vulnerabilities before commercial deployment.

Codenomicon pioneered the security test automation market with its launch of the first commercial fuzzing platform Defensics in 2001, and has maintained rapid growth ever since.

4.2.9. Mobile and mobile applications market 4.2.9.1. Background: strong history in mobile Due to its strong, Nokia-oriented mobile history and high IT literacy, educated ICT workforce with mobile competence, Finland has a highly developed mobile applications and devices development ecosystem.

Areas like healthcare, finance and smart traffic are now getting special attention.

It must be mentioned that business models for e.g. financing mobile application development and enabling easy application development have been introduced lately.

4.2.9.2. Major Finland and overseas players Nokia remains a very strong player in the Finnish economy. From an application developer point of view, AppCampus34 is an interesting initiative. AppCampus is an 18M euro joint project between Aalto University, Nokia and Microsoft, providing grants for approved Windows Phone applications.

An example of the funding models is Visionplus35. Vision+ invests into digital products such as applications, games and services in all digital platforms. These include mobile platforms such as Windows Phone, iOS, Android, Facebook, game consoles and PC/Mac. 33 34

http://www.lvm.fi/web/en/security http://www.appcampus.fi/

Another Finnish company emerging is Jolla. Jolla is continuing the Meego track abandoned by Nokia and it seems to be targeting the Chinese market. It is expected that Jolla will have its own application store.

The Vision+ investment model is based on revenue share financing, where investor return consists of royalties of the product cash flow targeting fast circulation of capital. In the area of Internet of Things, specialised accelerators are emerging, an example is Hitseed.

HitSeed is a European accelerator incubating and accelerating smart devices and hardware start-ups. Through its strong network, combined with the latest industry tools such as community collaboration, preordering, and outsourced manufacturing, HitSeed will turn emerging growth opportunities into hit products and start-up success stories.

For MEMS, State Research Center (VTT) MemsCat project36 has collected knowledge and start-ups utilizing the technologies.

37 MemsCat is a partnership devoted to help you in finding this added value and to integrate the intelligence into your products or services.

Mobile and MEMS converge in the Internet of Things. Most famous Finnish brands are Suunto, and Polar fitness products. An interesting sports measurement system is created by Omegawave, which claims to have implemented special algorithms enabling the tracking of physical state of the athlete.

4.2.10. Creative/video games market Finland is primarily known for Rovio and Supercell, but there is a large gaming ecosystem.

Mainly due to mobile know-how, mobile gaming has been getting special attention.

Gamification is about bringing game elements to Internet services and device user interfaces. It is about making the gaming industry know-how available to other industries.

4.2.10.1. Major Finland and overseas players The most famous Finnish gaming brands are Angry Birds by Rovio, and Supercell.

Rovio is based in Espoo. The company was founded in 2003 as a mobile game development studio named Relude.

However, one can question if Rovio is a gaming company. Recently, they announced the opening of kindergartens in China with the Angry Bird theme38 and they have even even considered entering the health care business.39 Supercell made global news headlines in October 2013, as 51% of it was sold to two Japanese companies, raising its full market valuation to 3B (billion) USD40. Supercell was founded in June 2010. It started developing games for mobile devices in 2011 and has since then released two games: Clash of Clans and Hay Day. Accel Partners invested 12 million dollars in Supercell in 2011.

Forbes magazine says “Supercell is the current king of mobile gaming, with its 8.5 million daily players generating $2.4 million every day, sometimes more. Supercell is already at a run-rate of more than $800 million for 2013, having earned $179 million before expenses in the first quarter alone. If Supercell plays its cards right, it could reach a billion by year’s end.”41 There are a number of runner-up companies in the area who could emerge as superstars of tomorrow. Ovelin, Digital Chocolate and Grey Area are only some examples42.

35

http://www.visionplus.fi/ http://www.memscat.fi/about-memscat/ecosystem-members http://www.memscat.fi/ 38 http://abcnews.go.com/Technology/wireStory/finns-angry-birds-teach-chinese-children-20208566 39 http://yle.fi/uutiset/peliteollisuus_laajentaa_nyt_terveysbisnekseen__rovio_tarvetta_on_palvelut_vain_puuttuvat/6821854 40 http://www.bbc.co.uk/news/technology-24541073 41 http://www.forbes.com/sites/karstenstrauss/2013/04/18/the-2-4-million-per-day-company-supercell/ 42 http://www.forbes.com/sites/karstenstrauss/2013/04/18/the-2-4-million-per-day-company-supercell/ 36 37

4.2.11. Telehealth/e-health 4.2.11.1. Background Finland is one of the leading countries in the development of wireless health and wellness technologies, which are used, for example, in enhancing healthcare processes, monitoring the patient's vital functions, and in locating and tracking patients, personnel and equipment.

Other examples of highly developed ehealth products are compatible patient record systems as well as intelligent systems supporting decision-making in the health care chain. There are also information network applications for self-care, independent coping and well-being at home, work and in hobbies.

4.2.11.2. Patient care There are major programs for wide IT system renewals in Helsinki and Oulu. The budget for the Helsinki region local government’s future IT system Apotti is about 400M euros.

The Apotti Programme is intended to improve the functionality and level of service for the social welfare and health care services. The social welfare and health care services overlap in particular within elderly care, mental health and substance abuse services and services for the handicapped. The data systems for clients and patients currently in use do not offer the necessary level of support for these services, nor do they aid the development of them. A part of the programme is, therefore, to purchase and adopt a client and patient data system of high international quality.43 Apotti is a cooperative programme. The participants include Helsinki, and capital area communities Vantaa, Kirkkonummi, Kauniainen and the Hospital District of Helsinki and Uusimaa. The scope of the programme includes all public health (all hospitals and all primary health care facilities) and social welfare operations in the area. The total number of users of the system will be about 44 000 and it will handle the information of 1, 5 million people in the area.

It seems like these major investments have also attracted foreign players interested in the Apotti related business. The Swedish health care IT vendor Cambio entered Finland in May 2013, and Danish healthcare IT vendor Systematic announced a partnership with systems integrator Digia in March 2012.

The Onion project in Oulu emphasises “mobile and home hospital concepts”, targeting the utilisation of modern ICT tools.

In the vision, patients will be taking many common diagnostic tests themselves and the visits of and stays at hospitals will be minimised. Oulu University hospital is involved in the project and University of Oulu Center for Advanced Systems is a neutral interface to external parties. The project is in its precommercial phase and the target for the new health care system and hospital to be online is year 2020.

4.2.11.3. Elderly care Electronic health care technologies and intelligent services for the elderly present considerable opportunities for growth due to the changing age structure of the Finnish population.

Finland requires more information technology solutions to deal with the challenges faced by its health care system due to the country’s rapidly ageing population. It is envisioned that by the year 2030, the number of hospital beds and staff in Finland will be nowhere near sufficient to cope with the increasing number of people requiring care.44 In Finland, the financial burden laying on the working population to finance the health care of the whole population increases annually. The current ratio shows that 100 working people are supporting about 50 other citizens, mainly elderly people and children. However, by the year 2030, 100 people in employment will already be supporting 70 others, mainly elderly.

In 2010, Finland had over 50 different projects for developing remote care methods, such as patients taking measurements at home and using the internet to interact with their doctors.

Also, the need for a pan-European health care system to serve the traveling “young elderly” is emerging.45

43 44 45

http://www.hel.fi/hki/apotti/fi/Apotti-hanke/English http://www.investinfinland.fi/articles/news/ict/finland-urgently-needs-more-it-support-in-health-care/44-855 http://www.telemedicine.fi/en/

4.2.11.4. Major Finland and overseas players The healthcare and telehealth related ICT market in Finland has traditionally been controlled by large players like Tieto, Fujitsu and CGI. Tieto had a market share of 23% of overall IT services, Logica 14% and Fujitsu 13%.46 In laboratory and diagnostics, MyLab holds major market share of some 90% percent. MyLab has been in business since 1987.

However, its annual turnover is ca. 11M euros only.

Other notable new companies are Mawell47 and Medixine. Medixine Ltd. specializes in software for multichannel communication e-services for health care and wellness. Its solutions include population based health forecasting and reminder systems, and patient based disease management and e-care systems.48 Due to the inevitable population aging, several companies are investing in the field. The Finnish company Vivago was a winner in the 2nd EU SME eHealth Competition. VivagoGlobal is a personal security system calling for help when the patient cannot, offering preventive care and reduced costs.

The Finnish company Mediconsult was a finalist with its Medinet service, which provides necessary health status data and engaging users through remote self-reporting and treatment.49 In fitness area, one of the best success stories of Finnish eHealth companies are Polar and Suunto, whose heart rate monitors and other sports equipment are used all around the world.

A quick scan of active players in the field can be found at Finnish Society for Telemedicine and eHealth member listing. 50

46

Report by Teknologiateollisuus http://www.mawell.com/web/page.aspx?sid=3311 http://www.medixine.fi/ 49 http://ec.europa.eu/enterprise/newsroom/cf/itemdetail.cfm?item_id=6639&lang=en&tpa_id=0&title=Commission-awards-prizes-to-best-eHealth-SMEs 50 http://www.telemedicine.fi/en/member-organisations 47 48

5. Accessing the Finnish ICT Market 5.1. BACKGROUND In general, Finnish buyers and resellers are eager for new technological benefits, which they seek to deploy. However, the public sector has its own procurement processes. Also, major companies have their own sourcing procedures, as common in other EU countries.

Trade fairs are commonly used in Finland and a good possibility to meet new contacts or for benchmarking.

5.2. TRADE EVENTS Here a coverage of ICT related trade fairs or events:

TalentIT Career Fair is Finland’s largest recruiting event in the field of ICT. The Fair takes place in Dipoli, Otaniemi (Espoo) on November 7th 2013. It fair brings together students, young experts and employers in the field of ICT. http://www.aalto.fi/en/cooperation/career_services/talentit_career_fair/

IBM Smarter Business 2013 is an event for business executives and experts, who are searching for new perspectives and new technologies for their services. At this popular event, several success stories are presented by IBM professionals, keynote speakers and representatives of customer companies. These stories show what kind of opportunities the utilization of new technology may create. http://www-01.ibm.com/software/fi/smarterbusiness13/

Proact Summit’ 13 will be held on September 17th in Helsinki. The event aims at IT and business decision makers and professionals. The program is divided into two alternative approaches: the business-focused case workshops and the more technological and detailed demonstration workshops. The keynote speaker is Mr. Frank Korsström, Nordic Managing Director of Accenture.

Assembly is an event organized by young computer enthusiasts for young computer enthusiasts. The most important thing about Assembly is the demoscene competition: the combined talents of programmers, musicians and graphics artists resulting in amazing audiovisual shows; demos that run in real time on your computer. http://www.assembly.org/summer13/

Finnish Internet Forum is a national multi-stakeholder process which discusses Internet-related issues. Its organizers hold an annual meeting and some smaller events throughout the year.

The last Finnish Internet Forum has taken place on April 25th 2013. The date for 2014 has not yet been published. http://www.internetforum.fi/

5.3. TRADE FAIRS

Where the business and ICT solutions meet!

For the fifth time, ICTexpo Helsinki 7.-8.5.2014 offers two effective days full of innovations, inspiration and information.

As the biggest professional IT-show in the Nordics, ICTexpo helps you to take your business to the next level with large variety of solutions. http://www.easyfairs.com/events_216/ictexpo-helsinki2014_45506/ictexpo-helsinki-2014_45507/

5.4. REGULATORY ISSUES AND COMMON PURCHASING PRACTICES 5.4.1. Background: enabling business opportunities It is an imperative for Finland to create frictionless market opportunities and regulations for ICT products and services.

In regulatory policies, Finland is tightly aligned with the EU. Also, the ICT2015 report stresses the importance of regulatory policy.

The Ministry of Finance summarises the EU anticipated changes and harmonization goals as follows: In the strategy period, the EU is preparing legislative changes that will influence Finland’s national information management procedures. These include the Public Sector Information Directive (PSI) and the reform of procurement directives. In this strategy, an effort has been made to take into account the principles of these directives, which are still in preparation. The EU has prepared proposals for regulations on electronic identification and data protection. As regulations, they would also come immediately into force on a national level. They will have a significant impact on the implementation of various projects.

Finland aims to influence the content of both the regulations and the directives in accordance with policy lines approved in Parliament. In addition, a number of e-government cooperation projects are under way in the EU, and these must be taken into account in national decisions.51 5.4.2. Regulation of electronic communications: Ficora The key regulatory body for the regulation of electronic communication services is FICORA. The core of FICORA operations lies in providing an information-secure society and interference-free communications networks, effectively functioning communications markets and securing the consumer position.

FICORA maintains an overview of the functionality of electronic communications networks and information security, as well as reports of potential information security threats.

The authority's goal is to enable equal opportunities for the use of communications networks, versatile services for various service providers, and to ensure that communications networks and services are compatible as network technologies advance.

FICORA also plans and administers the use of radio frequencies, communications network numbers and network addresses necessary for effective electronic communications connections. A responsibility of national and international importance is the centralised administration of radio frequencies at FICORA, which ensures the efficient and maximally interference-free use of frequencies.

Also, the authority enhances the provision of versatile electronic media services. 52 5.4.3. Data ombudsman The office of the Data Protection Ombudsman is an independent authority operating in connection with the Ministry of Justice.

(Contact information) The Finnish Constitution guarantees every citizen's private life and honour and the sanctity of the home. The protection of personal data is stipulated in detail by an Act. One of the objectives of the Personal Data Act is to improve the opportunity of individuals to control the use of their personal data. We have the right to know why and how our personal data is being processed and to decide about the processing, unless otherwise stipulated by the law.

As the use of information technology is increasing and the sphere of communication is rapidly expanding, the protection of privacy is becoming even more topical. Everyone should control the processing and circulation of his or her personal data.

The controller is responsible for the processing of data.

The Data Protection Ombudsman and the Office of the Data Protection Ombudsman provide guidance and advice on all issues related to the processing of personal data and control the observance of the law.53 5.4.4. Data centre related regulations It is important to note that the EU data privacy directive states that information cannot be moved outside the ETA without explicit user permission, which is a competitive factor.

There is also a new directive impacting cloud services: so far, the end customer has been responsible for complying, while from now on, the processing party also has some responsibility.

This has to be taken into account whenever a database is created, e.g. for e-commerce transactions.

51 52 53

http://www.vm.fi/vm/en/03_press_releases_and_speeches/01_press_releases/20121019Firstc/julkictstrategy_EN_20121031.pdf http://www.ficora.fi/en/index/viestintavirasto/esittely.html http://www.tietosuoja.fi/1560.htm

5.4.5. Regulation for medical devices The Medical Device Directive (Council Directive 93/42/EEC of 14 June 1993 concerning medical devices, OJ No L 169/1 of 1993-07-12) is key in regulating medical devices.

Compliance with the revised directive became mandatory on March 21, 2010.

A key change in the Directive is about IT software for e.g. diagnostics. Following this directive, even stand-alone software may be regulated as health-care device.

5.5. PURCHASING PROCESS GUIDELINES The purchasing process for the public sector in Finland is impacted by a rigidly defined RFQ process. One of our interviewees explained: “In the case of a municipality buying an ICT system, the clauses in tenders are defined very rigidly. Vendors must match the requirements one by one and their hands are tied as they risk dropping out if they do not match.”

This is not an issue in Finland only. The City of Stockholm for example chose Tieto for a project, because the other candidates made technical errors in the process.54 5.5.1. Hansel, Hilma and Ted for procurement information A key actor in the public ICT procurement process is Hansel, the centralised organisation governing this process.55 However, Hansel’s role is to manage the offers and the procurement process rather than consulting on the IT system requirements from a technical point of view.

In 2012, government IT purchases via Hansel reached 168M euros. 56 In Finland, the purchase plans are announced in the national Hilma system, and those exceeding EU limits in the pan-EU official TED procurement system57.

These systems should be followed by the active vendor.

5.5.2. Tiera – coalition of municipalities for ICT Tiera58 is a coalition formed by some 250 municipalities with the goal of fixing the problems caused by fragmented architectures and helping with the migration to compatible solutions.

Tiera targets cost savings through the bundling of purchases and better control of procurement processes and deployment project management.

5.5.3. Terms of contract for private sector IT purchases The Finnish Chamber of Commerce has released widely used IT purchase terms of conditions, which are used in the private sector. The IT2010 contract terms facilitate the making of contracts related to IT. The contract terms can be used in domestic IT deliveries between customers and suppliers. For more information, visit www.it2010.fi.

The contract terms are available in Finnish and English. You may purchase a company or corporate group licence for the IT2010 terms. It is also possible to acquire the terms for educational, teaching, and library usage. 59

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http://computersweden.idg.se/2.2683/1.474049/storkonsulternas-miljardflopp/sida/2/sidan-2 (in Swedish) http://www.hansel.fi/en http://www.tietoviikko.fi/kaikki_uutiset/valtion+ithankinnat+kasvoivat+hanselissa/a888260 57 http://ted.europa.eu/TED/main/HomePage.do 58 http://tiera.fi/ 59 http://kauppakamari.fi/en/legislation/e-business/it2010/ 55 56

6. Recommendations 6.1. INTRODUCTION: BUILDING A BASIS FOR RECOMMENDATIONS 6.1.1. Market channel according to product type and the ICT market in Finland The Finland ICT market is currently in a turbulent situation, due to the collapse of the Nokia ecosystem and slow or negative GDP growth. Many ICT technologies and solutions do promise improvements in user benefits or cost reductions. Yet there are doubts if especially the public sector buyers have the know-how or means to adopt the new era solutions.

Consequently, it makes sense to evaluate and choose relevant market channels for yourproduct, meaning that the nature of the product must be understood first. To accomplish this, a Product Uncertainty categorisation60 can be used. Put simple, products are positioned in four categories based on their nature as follows: 1.

2.

3.

4.

Optimised products, which are typically incremental improvements to existing products.

Market-driven products, which are developed based to market research results or change in legislation or e.g. new EU directives.

Technology-driven products are often based on patentable inventions. These are often “solutions looking for problems”.

Innovative product, which combine both market and technological aspects. The man on the street often cannot imagine such a product solving his needs.

Naturally, there may be exceptions to these recommendations quite well.

6.1.2. Choosing a channel for your product As we move from Optimised to Innovative products, the market-related uncertainty grows, but at the same time competition with existing Optimised products is fiercest and it is most difficult to set prices for Optimised products. Buyers and vendors often know each other and existing vendors in the market have tuned their business model over several product generations.

However, the market demand for Optimised products is often well-known and can be forecasted. Therefore, provided there is a feasible route to market and the market is attractive, it may make sense to set up an own company for Optimised products to impose control of business and manage costs.

In the case of mature markets, where existing players have a stronghold, it typically makes sense to choose a careful approach via partnerships. Optimised products either need to find a new target market segment or compete with the price or a complementary function, e.g. after sales service.

For market-driven products in B2C-markets, it is important to get consumers’ attention and an early market share.

Technology-driven or visionary products may create entirely new markets, as products in these categories solve a problem which potential customers may not have been familiar with.

If the new emerging market becomes visible, however, existing players in related markets may be interested to partner with you. It makes sense to move to the market fast.

Visionary products may require that a whole new market is developed with well-chosen partners and market channels, putting emphasis on business development activities.

6.2. BACKGROUND AND RECENT DEVELOPMENTS

60

Derived from work by G. Cohen in Lean Product Management

6.2.1. A wave of spinoffs and start-ups Due to economically hard times in Finland, and consequently in the Finnish ICT market, selling to the public sector and many private sector companies in Finland is a challenging task today, but may at the same time be easier and potentially more rewarding than it used to be. Nokia and related ecosystem companies have downsized, and are under financial squeeze, but may also be looking for new business opportunities.

Verso Ventures exemplifies the current spinoff trend. It has developed a model for corporate spin-offs, which offers a financially attractive way for corporations to enable new jobs to be created from non-strategic activities.

It is currently investing into spin-offs via the first Verso Spin-off Fund. Nokia Siemens Networks is the first investor with a 10M Euro commitment. The fund is open for additional investors.

6.3. TARGET SUB-SECTORS AND MARKET OPPORTUNITIES 6.3.1. Software and services market The software and services market in Finland is mature in many sectors and vendors have optimised their customer channels.

Consequently, it makes sense to evaluate opportunities created by changes in the technology or market requirements.

Recommendations:  Explore the impact of changes in EU directives, which may open new markets.  Partner with existing strong ICT integrators, e.g. Tieto, Fujitsu and CGI or a challenger one like Digia.  Finland’s machine-building industry deploys ICT solutions: these call for long-term relationships and patient development.  If your business is in diagnostic equipment: MyLab is in a mature business, but with 90% market share, innovative solutions welcomed. MyLab has also business in e.g. China.  Finland may be utilized as entry point to selected industries as well as due to its technology know-how and ICT worker oversupply.

6.3.2. eGovernment According to our interviews, there is a trend towards favouring open source solutions like the HADOOP database in public sector ICT architectures. This trend may open entry opportunities for best-of-breed SMEs, which provide additional value. The previous generation architectures were more like closed database and closed interfaces, whereas Finland may now be moving towards more open solutions.

However, it is important to follow if there will be a true disruption in the market or continuity. Continuity may mean more sales to existing players selling “optimised products” with only incremental improvements from the buyer perspective. The alternative is that the market will embrace “innovative solutins”, meaning truly new buyer benefits will be enabled.

The question is also how to enter the market early enough to utilize these developments.61 Here, it may be that the role of SHOKs is important as this is where the future is built. However, SHOKs projects are typically positioned between the commercial and the research phase in the product life cycle and working with them will not provide quick wins.

Municipalities have a growing need for outsourcing finance administration tasks which will create a growing market.

Municipalities typically have several affiliate companies and numerous Finnish municipalities have been merging too, which creates a challenging situation for managing ICT systems, exacerbated by a shortage of funding.

The market is expected to grow strongly in the coming years. Currently, the market size is expected to be around 800M euros for finance and business administration ICT solutions. However, municipalities have been slow in their decision-making.62

61 62

Interview with MF here http://www.kauppalehti.fi/omayritys/kunnista+avautumassa+miljoonien+markkinat/201308477319 (in Finnish)

6.3.2.1. Organization of government and near-term focus areas Finland’s government program assigns each ministry to define its own digital strategy in the so called KIDE program.

The ICT2015 report defines new targets for automating data interchange between the public and the private sector. The requirement is to avoid unnecessary changes to current public sector IT systems. The implementation should happen through four programs in the year 2014 (Realtime Economy).

The areas cover: salary taxation management VAT payment management automatic processing of company financial statements automating SME companies e-payment processing The report outlines a special generic need for electronic identification solutions for the public sector.

One of the most crucial steps in the creation of an efficient ICT infrastructure will be the creation of a comprehensive national electronic identification system.

6.3.2.2. Recommendations  Follow how ICT2015 report recommendations are initiated and implemented in reality, as new market opportunities may emerge.  Understand the bigger picture for funding public ICT expenditures, as there is a public funding squeeze. It may make sense to partner in order to identify other new entrants or an existing player in the need of finding new competitive assets.  Analyse opportunities with major development programs, e.g. Helsinki region and Oulu hospital systems.  Anticipate market changes driven by new or updated EU Directives.

6.3.3. eHealth endpoint devices 6.3.3.1. Market situation Currently, the market for eHealth endpoint devices may be changing. For healthcare, there are rigid regulations and corresponding market channels, while distribution of well-being products happens via supermarkets.

Traditionally, pharmacies have been important distributors for medical devices.

The fact that there is an overlap between medical and well-being products makes the situation more interesting. Therefore, the same device may be sold in both areas. E.g. a sleep detection sensor vendor has chosen to sell its device as a well-being product in order to avoid the strict regulation.

6.3.3.2. Recommendations Evaluate the market channels carefully. It is unclear what will happen with Finland’s pharmacy system in the future.

Traditionally, pharmacies have operated under a licence in Finland, but there has been public discussion about the big supermarket chains (S-group and K-group) potentially getting involved.

6.3.4. IT security/Cyber security market 6.3.4.1. Market situation There are both technological and market–originated changes impacting the market. Securing the cloud and managing BYOD devices are the key trends. The NSA related news in the summer of 2013 have raised awareness of IT. It remains to be proven, but it seems that “neutrally European” is a market argument that will be used.

In the public sector, Finland has recently established the information security cluster FISC and the ICT2015 report also outlines the foundation of a cyber-security centre.

6.3.4.2. Recommendations:  Identify where there is a need for complementing technologies. A possible era is with identification technologies.

 

As customers, Finnish IT security companies are easily reached directly or at exhibitions. Due to this, a direct approach may be feasible, yet the customer work related costs naturally need to be weighed against potential benefits.

There are technologically promising growing IT security companies which are looking for international distributors or integrators as partners, as market access is a typical handicap for Finland’s high-tech companies. This should be evaluated by interested parties.

6.3.5. Mobile applications market Today, the mobile applications market is in many instances crowded with optimised products. Also, many Internet of Things verticals for e.g. fitness have been getting attention from players like Nike. There may be some game changers ahead, however.

The Finnish market may be used for product testing and especially finding development partners for e.g. brands in other areas.

Also, due to strong know-how in sensor technologies, mobility and related cloud-based analytics, Finland’s industrial companies may be a route to developing industry specific verticals.

Opportunities may emerge by  analysing Jolla’s position as possible discontinuity maker and channel for distributing applications, e.g. entry to China  participating in the Windows Phone ecosystem via AppCampus  developing and moving in with new industry verticals sectors where smart mobile devices will add value  work to offer complementary technologies for established Finnish companies in the Internet of Things area.

Some examples of such companies are Kone, Outotec, Metso, Wartsila, Konecranes, Valmet, Vacon 6.3.6. Creative/Video Games Market 6.3.6.1. The vibrant Finnish gaming industry The gaming industry in Finland has 150 companies. The industry turnover for game development has grown from 87 million euros to 250 million euros in 2012. In 2011, investments amounted to 50 million euros. The projected turnover in 2020 is 1,49 billion euros63.

The biggest companies Rovio and Supercell are household names globally. The gaming industry in Finland has ten core companies, 25 runner-ups and some 50 smaller companies. Helsinki Capital area is where the companies are located.

Rovio has an aggressive partnering strategy as their partners are often non-high-tech companies, ranging from game parks to soft drinks to fishing equipment.

Also, gamification companies are entering the market place and their solutions may offer opportunities for other industries.

There are early examples for e.g. developing control-UIs for machinery.

There is also the aspect of fostering brand loyalty in the Web by adding gamification elements.

6.3.6.2. Recommendations The gaming industry and gamification trend offer rich opportunities as gaming products can be positioned as both technologydriven and innovative products. Also, gamification may enhance the offering of mature existing optimised products.

On the technology side, there is an ever-present interest to deploy new gaming-related technologies by Finnish gaming companies. Examples are technologies related to cloud gaming, graphical and visual optimisations, as well as gaming engines and console platform technologies.

Recommendations:  Finland has a rich gaming scene and the companies can be approached easily. People are typically young and eager to build connections and understand the fast-moving nature of the industry  Analyse and target the most important possible gaming companies, e.g. the ones that are funded by TEKES64.  If your company is in the field of game related technology development, approach gaming companies at trade shows or via gaming clusters such as Neogames3

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http://www.tekes.fi/fi/gateway/PTARGS_0_201_403_994_2095_43/http%3B/tekesali2%3B7087/publishedcontent/publish/programmes/skene/documents/finnish_game_industry_march_2013.pdf 64 http://www.tekes.fi/programmes/Skene/Projects



Companies needing brand or image support could utilise the Angry Birds brand. For Rovio65, it can be described that “the Angry Birds” brand is their platform. Rovio has been very active in licencing the Angry Birds brand to e.g. soft drinks and even fishing baits

6.3.7. Telehealth/e-health The telehealth/e-health market has been mature since a while, but there may be disruptions created by the the Oulu Onion project. However, squeeze-in public funding is increasingly creating pressure.

It might happen that the market shares for Finland’s patient care systems will be divided by the winners in Helsinki region and Oulu as the solutions developed for Helsinki regions and Oulu will be adopted by smaller communities.

For technology providers in identity management and diagnostics solutions, Oulu Onion project should be contacted via University of Oulu. However, it must be remembered that the timescales from precommercial trials to commercial deployment will be long.

An area with potential is the diagnostic field, where MyLab is the dominant market player. As a Systems integrator with 90% market share, they might help innovative players. The problem is that their market is rather small; their turnover was ca. 11M euros in 2012.

6.4. RECOMMENDATIONSSUMMARISED 6.4.1. Generic recommendations Looking at the Product Uncertainty Matrix presented in the beginning of this chapter, the generic recommendations for accessing the Finnish market are:  For optimised products, to enter a market one would either have to offer lower cost or target a new market segment. Looking at the ICT market situation, this category is most challenging to enter.  For market-driven products: Finnish buyers and ICT companies have been eager to enter markets early with products. However, the Finnish market is quite small. It may make sense to explore the option of partnering with a Finnish company to develop a solution for e.g. EU markets.  For technology-driven products: Here, it makes sense to try to enter the market through a technology development hub like Digile or related gaming cluster or FISC for IT Security.  For innovative products, the same recommendations as for technology-driven products are applicable. However, even longer timescales may be needed, as ecosystem development and a precommercial development phase may be needed.

6.4.2. Special attention: data centre opportunity Changes in regulation may create demand for market-driven products. With regard the data privacy, regulation has yet to be determinded in September 2013.

E.g. in Germany, there has been a stricter approach towards cloud providers in July 2013. Also, the Swiss company CloudSigma has structured its global cloud service operators as separate entities to provide more data protection. 66 6.4.3. Special attention: Finland’s start-ups One of the major trends has been the emergence of startups, which mostly focus on Web or mobile applications, typical areas being gaming, fitness, e-commerce and brand development. The small Finnish domestic market presents a challenge for startups looking for rapid growth and consequently international markets are targeted. Often for a Finnish startup, the technology base is solid, but international marketing and customer channel need improvement.

Because of fast-moving businesses and eagerness for new innovations by their key people, starups can be reached easily. The best way to establish such a contact is through the Web or by meeting at trade events like the Slush trade show, the largest startup event in Northern Europe or maybe even Europe.

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http://www.rovio.com/en/about-us/contact http://www.ft.com/cms/s/0/dbee868a-f43c-11e2-8459-00144feabdc0.html#axzz2dzUnOuLj

6.5. MARKET ENTRY STRATEGIES 6.5.1. Introduction Here, we explore the various approaches to entering the Finnish ICT market. There is plenty of material and advice available and in general, the same principles apply as for other EU countries.

6.5.2. Direct The main reason for using a direct channel i.e. setting up an affiliate company is typically better control of operations and management of business than when using an indirect channel. The downside is typically higher fixed costs with possible long payback time in ramping up sales, unless there is an already developed market.

It must be noted that there is a fast lane approach: there are opportunities to acquire an existing software company due to owners retiring.

Setting up a business in Finland is quick and easy. PRH (National Board of Patents and Registration for Finland) has clear instructions, .67 Options include incorporation, sole proprietorship, a partnership (general and limited), or a joint venture.

Issues that must be dealt with include the tax implications associated with different structures68, local legal systems, accounting principles, special permits and registration procedures. There is help available for closing deals with estate agencies, recruiting companies, legal firms, accountants and providers of marketing services at the stage when you don’t yet have permanent staff in place.69 If the foreign company’s only business in Finland is to take care of a single contract, job or assignment, the company may apply for a tax at source card instead of prepayment registration. No Start-up notification or prepayment registration will be necessary. The tax at source card can be granted if the foreign company does not have a permanent establishment in Finland and it has in Finland only a few short term activities.

Localising your business plan requires careful evaluation of potential entry alternatives: offerings, partners, channels, goals and the creation of a roadmap for dealing with emerging competitive and partner scenarios.

Starting an affiliate company is straight-forward as Finland is currently investing resources in helping out foreign companies.70 6.5.3. Indirect Using an indirect channel in the form of a reseller or VAR is often the first choice as market success is more uncertain. Again, Finland is very similar to other EU countries. Some factors to be noted: Finland’s market is small and the country terrain large. In case the product sales require face-to-face meetings with end-users or organisations, the capacity of the reseller must be understood.

It must be noted that there are certain sales companies that have representatives in e.g. Baltic States, enabling access of those markets via Finland.

Also, the total product range, know-how and long-term partnership potential should be available.

A foreign ICT company may also consider licencing its technology. Related agreements should be undertaken with specialist help. Finland ranks high in intellectual property protection and in e.g. the number of ICT patent applications per population.71 Switzerland Global Enterprise together with the local Swiss Embassy can always assist in finding new partners on site.

6.5.4. Publicly funded expert help A specific way to enter Finland’s technology scene is to set up R&D activity in Finland. The reason why this may be a feasible option is the availablility of skilled ICT workforce and opportunities generated by generous public funding.

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http://www.prh.fi/en.html http://www.vero.fi/en-US/Companies_and_organisations/Foreign_business_in_Finland/Starting_up_business_in_Finland___foreig(15344) http://www.investinfinland.fi/why-finland/useful-links-to-finland/93 70 http://www.yrityssuomi.fi/web/guest 71 http://www3.weforum.org/docs/WEF_GITR_Report_2013.pdf 68 69

For companies wanting to establish themselves in Finland, there are several alternatives available.

E.g. Invest in Finland72 provides guidance for interested people.

To assist ICT companies seeking to utilise the ICT workforce in Finland, there is a special initiative: KAATO73 is a community of ICT experts and highly-networked individuals. KAATO has already proven itself through early success cases.

6.5.5. Market and trading risk factors Finland ranks as politically stable country and its industry has proven to be competitive in export markets of various sectors.

There are, however, some risk factors to be taken into consideration. Regarding its long-term debt, the State of Finland receives the best possibly rating by agencies such as Moody’s74. Yet, the structural changes planned by the government could be delayed, leading to a lower ranking and higher cost for state financing. Also, the generally export-driven economic situation may be altered by a potential downturn in important destinations for Finnish exports such as Germany and Russia.

6.5.6. Success factors Talking about success factors for entering the Finnish ICT sector, the generic combination of understanding one’s product and consequent position in the market as well as understanding Finland’s ICT market has to be highlighted.

In the fast moving world of ICT, it often makes sense to contact customers face to face at e.g. trade shows and using the Internet as channel. However, at an early stage of the market cultivation, indirect channels are often preferable. This implies that the technical and financial background of partner companies must be understood.

6.5.7. Conclusions The different areas of the Finnish ICT market find themselves in various phases. A Swiss company with a strong USP and innovative selling proposition has good changes to find demand in Finland. At the same time, there are segments of the markets that are very mature where it is more difficult to place new products, but where there may be changes ahead.

On the other hand, there are also various companies in Finland which sell their products internationally in e.g. gaming and Internet of Things areas that may turn out to be quite dynamic customers. There is no ready made solution. Every company will need to carefully assess their best entry strategy into such an interesting dynamic market.

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http://www.investinfinland.fi/services/entry-alternatives/34 http://www.kaato.org/ http://www.vm.fi/vm/en/03_press_releases_and_speeches/01_press_releases/20130529Moodys/name.jsp

7. Directory of useful contacts 7.1. GOVERNMENT ORGANISATIONS 7.1.1. List of ministries Key ministries with an impact on the Finnish ICT market and development are described below.

Ministry of Defence75 is the leading authority in the area of national defence. The Ministry of Defence is in charge of the national defence policy, national security and international cooperation in defence policy matters. It is has been an important player in creating a Cyber Strategy for Finland.

Ministry of Education and Culture76 is responsible for Finland’s educational system.

The Ministry of Employment and the Economy (MEE)77 is responsible for the operating environment underpinning entrepreneurship and innovation activities, securing the functioning of the labour market and workers’ employability, as well as for regional development.

Its responsibility includes areas impacting ICT in Finland, e.g.:  industrial policy  energy policy and integration of the national preparation and implementation of climate policy  innovation and technology policy, internationalization of enterprises and technical safety  employment, unemployment and public employment service, working environment issues, collective agreements and arbitration of labour disputes  functionality of markets, promotion of competition and consumer policy The Ministry of the Interior78 is responsible for internal security, including internal cyber threats.

The Ministry of Transport and Communications79 is responsible for two broad sectors: transport policy and communications policy.

In the communications sector, the Ministry takes care of issues relating to communications networks, information security and data protection, information society policy, the mass media, and postal services.

7.2. TRADE, MEMBERSHIP AND PROFESSIONAL ORGANISATIONS 7.2.1. List of key organisations The Association of Finnish eLearning Centre80 is an independent national association that promotes the sharing of knowledge, best practices and quality in e-learning. The Centre distributes information and performs as a contact surface for partner finding in the Finnish e-learning market.

The Centre of Expertise Programme (OSKE)81 is a fixed term special government programme aimed at focusing regional resources and activities in development areas of key national importance. The programme promotes the utilisation of the highest international standard of knowledge and expertise that exists in the different regions.

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http://www.defmin.fi/english http://www.minedu.fi/OPM/?lang=en http://www.tem.fi/en/ministry 78 http://www.intermin.fi/en 79 http://www.lvm.fi/web/en/home 80 http://eoppimiskeskus.fi/en/ 81 http://www.oske.net/en/oske/ 76 77

DIGILE82 aims is at increasing the pace of development of the Finnish ICT and digital business, which in turn will ensure growth of the business of the whole sector, and thereby the creation of new jobs. Nowadays, digital business is an essential part of all kinds of business as well as public services – not just ICT. Digile is one of Finland’s Strategic Centres for Science, Technology and Innovation (SHOKs) and so DIGILE’s role is not only to bring together and systematise research and development, but also to ensure that the results of research are understood and applied as a part of companies’ business practice.

Finnish Federation for Communications and Teleinformatics (FiCom)83 is a co-operation organisation for the ICT industry in Finland, looking after the sector’s interests. FiCom's members are companies and other entities that operate in the communications and teleinformatics sector in Finland. The total turnover of FiCom's members is about EUR 6 billion.

Approximately 40 000 people work in their different locations.

FiCom's task is to promote business opportunities for its members and to enhance their competitiveness. In order to implement this task, FiCom  influences on ICT-related regulatory issues,  promotes the development of information and communications technology,  manages ICT statistics and business indicators,  maintains a comprehensive ICT data bank,  openly communicates current professional issues to various target groups and  contributes the ICT industry's public image.

FICIX84, Finnish Communication and Internet Exchange association is the biggest Internet exchange point (IXP) in Finland. Since 1993 FICIX has provided neutral and reliable IP peering facilities for its members. As a registered association, Ficix is a non-profit organisation with currently 28 members.

FICIX operates as an association under Finnish association law. Operations are led by annually elected trustees and carried out mainly by outsourced service providers, i.e. technical maintenance and accounting. FICIX is a member of Euro-IX (registered to Netherlands) which gathers up 60 IXP's from 36 different countries around the globe.

The Finnish Information Processing Association (Tietotekniikan liitto ry)85, is an independent association of Finnish ICT professionals and companies that provide ICT products and services or use them. FIPA has currently 15 000 professionals and about 500 companies and organizations as members. They are organized as 28 individual FIPA member associations on the basis of geographical area or professional theme. In addition, there are three student associations and20 special interest groups (SIG).

FIPA's main objective is to develop the professional skills of its members by means of networking, member activities, seminars, training, certification programs, mentoring programs, publishing and research. Seminars, trainings and events are organized by their member associations and SIGs. Finnish Information Security Cluster86 is an organisation established in 2012 by major Finnish information security companies to promote their business and operations in a national and international context. Finnish companies and individuals are well-known for their inventions and efforts to improve security. Connected with excellent competencies on mobile and open source technologies, this gives a unique stand point for companies with Finnish operations. Finland also has a national brand of creating trustworthy, reliable and efficient operations and companies. This gives FISC members an excellent starting point in production and serving their customers.

FISC has more than 30 member organisations. Most of them are SMEs concentrating purely on information security technologies, but large multinationals with information security related operations in the country are welcomed as well.

The main target of FISC is to support its member organisations’ activities in the following areas: expansions to international markets, depth and width of high-level education and dialogue with national and international regulatory bodies.

The Finnish Information Society Development Centre (TIEKE)87 has a key networking role as a neutral and nonprofit organisation in promoting the efforts of its members, within the public and private sectors alike, with the ultimate goal of 82

http://www.digile.fi/# http://www.ficom.fi/inbrief/index.html http://www.ficix.fi/english/main.php 85 http://www.ttlry.fi/english 86 http://fisc.fi/ 87 http://www.tieke.fi/display/English/Home 83 84

creating viable tools and expertise for use in the information society.

TIEKE´s membership mirrors an entire spectrum of the Finnish society and all key players in the information society, totalling to more than one hundred organisations and companies. Members represent business enterprises that develop, manufacture, market, and support ICT products and services, as well as companies and organisations that deploy ICT in their operations.

Also, several ministries and public agencies, some of them directly involved in the promotion of Information Society development, have joined TIEKE. The Finnish Society of Telemedicine and eHealth88 aims at promoting the health of the population through telecommunication and to disperse the expert knowledge within health care. In order to reach this aim, the Society arranges seminars, lectures and presentations, courses and symposia. It develops a functioning electronic communication system between the members, exerts publishing activities, supports research within the discipline, formulates statements in issues dealing with telemedicine and has contact with other telemedicine organisations.

KAATO89 is a business community initiative, where experienced business leaders help international companies to establish and expand their presence in Finland.

KAATO matches the business and investment needs of the foreign companies with the high-tech and innovation opportunities available in Finland, enabling faster returns on investments.

The National Institute for Health and Welfare (THL)90 is a research and development institute under the Finnish Ministry of Social Affairs and Health. THL seeks to serve the broader society in addition to the scientific community, actors in the field and decision-makers in central government and municipalities. The aim is to promote health and welfare in Finland.

Neogames91 is a member-based non-profit game industry organization. Their mission is to accelerate, coordinate, and support the development of the Finnish game cluster. They exist to connect industry players and serve their shared interests. itSMF Finland92 is an international forum for professionals in IT-service management and decision makers. itSMF is active in over 50 countries and it claims to be the only independent it-service management forum of its kind.

7.3. REGULATORY BODIES 7.3.1. Background: enabling business opportunities It is imperative for Finland to create frictionless market opportunities and regulations for ICT products and services.

In regulatory policies, Finland is tightly aligned with the EU. Also, the ICT2015 report stresses the importance of regulatory policy.

The Ministry of Finance summarises the EU anticipated changes and harmonization goals as follows: In the strategy period, the EU is preparing legislative changes that will influence Finland’s national information management procedures. These include the Public Sector Information Directive (PSI) and the reform of procurement directives. In this strategy, an effort has been made to take into account the principles of these directives, which are still in preparation. The EU has prepared proposals for regulations on electronic identification and data protection. As regulations, they would also come immediately into force nationally. They will have a significant impact on the implementation of various projects. Finland aims at influencing the content of both the regulations and the directives in accordance with policy lines approved by Parliament. In addition, a number of e-government cooperation projects are under way in the EU, and these must be taken into account in national decisions.93 7.3.2. Regulation of electronic communications: Ficora The key regulatory body for the regulation of electronic communication services is FICORA. Organisationally it is positioned under The Ministry of Transport and Communications.

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http://www.telemedicine.fi/en/ http://kaato.org/ http://www.thl.fi/en_US/web/en 91 http://www.neogames.fi/en/ 92 http://www.itsmf.fi/ 93 http://www.vm.fi/vm/en/03_press_releases_and_speeches/01_press_releases/20121019Firstc/julkictstrategy_EN_20121031.pdf 89 90

7.3.3. Data ombudsman The office of the Data Protection Ombudsman is an independent authority operating in connection with the Ministry of Justice.94 7.3.4. Data centre related regulations It is important to note that the EU data privacy directive states that without explicit user permission information cannot be moved outside ETA which is a competitive factor.

This has to be taken into account in each case where a database is created, for e.g. e-commerce transactions.

7.3.5. Regulation for medical devices The Medical Device Directive (Council Directive 93/42/EEC of 14 June 1993 concerning medical devices, OJ No L 169/1 of 1993-07-12) defines the regulation of medical devices.

Compliance with the revised directive became mandatory on March 21, 2010.

A key change in the Directive is about IT software for e.g. diagnostics. Even stand-alone software may be regulated as healthcare devices.

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8. Conclusions The Finnish ICT market is undergoing major changes. The Nokia ecosystem has shed 16 000 ICT jobs and Nokia sold its mobile handset business to Microsoft. This means that the ICT ecosystem has no longer one single dominating player in a central role, but there are several emerging areas as the technology know-how has not disappeared.

Finland has several spin-offs, growth companies and startups in the areas of health care, gaming and Internet of Things, embedded ICT and sensor solutions used in car industry, to name just a few.

Finland has a powerful ICT sector with several emerging brands. In consumer markets, Angry Birds is a famous brand made in Finland. Companies like Google and Microsoft have invested in heavily in Finland for R&D and data center activities, along with Samsung, Nvidia, Huawei and Intel.

For Swiss companies looking to offer complementary products, the disruption may generate an opportunity. Finland and Finnish companies should be also looked at from an investment and partnering point of view Finland and its companies understand the need to change as society and the ICT sector is strategically important. The desire to generate new ICT business is at a high level.

9. Abbreviations used in this report ARP: analog radio phone network B2B: Business-to-Business B2C: Business-to-Consumer ETLA: Research Institute of the Finnish Economy FICORA: Finnish Communications Regulatory Authority FISC: Finnish information security cluster (FISC) GSM: Global System for Mobile Communications MEMS: Micro-Electro Mechanical Systems NMT : Nordic Mobile Telephone NRI: Networked Readiness Index SHOK: Strategic Centres for Science, Technology and Innovation TEKES: Finnish Funding Agency for Technology and Inn WEF: World Economic Forum VTT Technical Research Centre of Finland

10. Profile of report author Mr Janne Kari95 has a Master of Science degree (E.E.) from Helsinki University of Technology (currently Aalto University).

Janne worked between 1995-2012 for Nokia in various Product Concepting, Product Management and Business Development roles. His assignments have included also e.g. operator cooperation and partnering. He has domain expertise in VoIP (Realtime Internet) and new product creation.

Janne has two US patents (6154745, 6542489).

Before his career at Nokia, Janne worked as a technology journalist and as project manager at Microsoft in Dublin, Ireland.

Today, Janne is an entrepreneur whose company HaaVisio is specialising in VoIP and new business development and market strategy creation.

Janne has co-written a book on applying Lean Startup concepts to new product creation in organisations. 96 Janne is also currently involved with KAATO, which is an initiative to attract foreign ICT companies to Finland, due to the Nokia cluster restructuring.

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fi.linkedin.com/in/jannekari1/ http://www.elibris.fi/ulos-toimistosta-reittiopas-uusien-tuotteiden-tekijoille-p-100614.html (in Finnish)

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